BP p.l.c. (NYSE:BP) Q4 2022 Earnings Call Transcript
BP p.l.c. (NYSE:BP) Q4 2022 Earnings Call Transcript February 7, 2023
Craig Marshall: Good morning, everyone, and welcome to today's presentation. This morning, we're going to cover BP's fourth quarter and full year '22 results. We'll also provide an update on strategic progress. Before we begin today, let me draw your attention to our usual cautionary statement. During today's presentation, we will make forward-looking statements, including those that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to the factors we note on this slide and in our U.K. and SEC filings. Please refer to our annual report, stock exchange announcement and SEC filings for more details. These documents are available on our website. On that, let me now hand over to Bernard.
Bernard Looney: Well, thanks, Craig, and good morning, everyone. It's great to have those of you on the call join us. And obviously, it's great to see people here in London this morning. Before we begin, after yesterday's terrible earthquakes in Turkey and Syria, our thoughts obviously go out to colleagues and everyone with friends and family in the region. All our colleagues are accounted for, and we have a team set up to support them. But of course, many, many more people were affected thousands of people have died and we'll do what we can to support. There will be operational matters to attend to in time. But in our -- in the first instance, our focus is obviously on people. I'm here today with Murray, who is standing ready to take over here in a few minutes, poised.
And I'll be joined in a bit for Q&A by Carol Howle, Gordon Birrell, Emma Delaney and Anja Dotzenrath. The rest of the BP leadership team are also around Giulia Chierchia, Eric Nitcher, Lean Russell. So you'll get a chance to meet them as well. Three years ago, we announced a significant strategic change for BP pivoting from, at that time, a 110-year history of being an international oil company, or IOC, to becoming an integrated energy company, or IEC. I'm personally in all of what the BP team has delivered since then. And all during the most volatile and the most uncertain times that many of us, I think, have ever experienced. When we updated the market this time last year, I said to you all that our direction was set. Our change was done and we were now 100% focused on delivery, and that is exactly what we have been doing.
With that backdrop, there are 3 things that you'll hear from us today. The first, and important is that BP is performing. Our businesses are running well. Our costs are being controlled. We are reducing emissions. We are growing value. We feel and believe our strategy is working, and we are more confident than ever that what we laid out in 2020 as a strategy is the right one. And as we've said and your Board of it consistently that we are performing while we are transforming. Second, we are leaning further into our strategy. We're planning to invest more into our transition growth engines and not or, and at the same time, investing more into today's oil and gas system. A plan that we expect will materially increase EBITDA by 25% and by 2030.
And third, crucially, we are delivering for shareholders. In 2022, we have grown distributions through an increase in our resilient dividend and delivery of a material share buyback program. So let's start it off if it's okay with a little video that shows -- it's 2 to 3 minutes, so it won't be too long. That shows some of the delivery by the team at BP over the last 3 years. So we're going to play the video. So thanks for -- it's as much for our own teams that would be showing them later today as anything else. But I might be a bit biased. I am probably a bit biased. But I think that's pretty brilliant, and I'm really proud of the people at BP for their part in delivering that. Turning now to focus on delivery in 2022. First, reflecting, as we said, in the video on safety.
At BP, safety comes first. It's core to the way that we live our purpose. We have seen our combined Tier 1 and Tier 2 process safety events continue to improve in 2022 compared to 2021. However, we do know from incidents during the year that there's always more that we can and must do and we will do that and safety remains and is foundational obviously, to everything that we do. Turning secondly, to our businesses where our focus on operational reliability and cost performance underpinned strong financial delivery. Adjusted EBITDA for 2022 was $60.7 billion; operating cash flow was $40.9 billion, including a working capital build of $6.9 billion. Net debt reduced for the 11th quarter in a row to reach $21.4 billion, the lowest level in almost a decade, and return on average capital employed was 30.5%.
And third, we delivered for shareholders. Executing against our clear, consistent and disciplined financial framework and delivering what we believe are sector-leading distributions. Today, we have announced a 10% increase in our dividend per ordinary share for the fourth quarter, underpinned by our strong underlying performance and supported by our plans to lean into our strategy and deliver further growth in EBITDA. Including this increase, our dividend per ordinary share for the fourth quarter is 21% higher than a year ago. and very importantly, fully accommodated within our resilient $40 per barrel balance point. And since commencing the share buyback program in 2021, and we have reduced our issued share capital by 11%. I'll say more about our plan to lean further into our strategy in a moment, but let me first hand over to Murray to run through our results in more detail.
Murray Auchincloss: Great. Thanks, Bernard, and good morning, everyone. It's so nice to see you in the room and online. As usual, I'll start with the macro environment. During the fourth quarter, Brent fell by 12% relative to the third quarter to average $89 per barrel. This reflected increased uncertainty over the economic outlook and relatively high production from Russia and OPEC. In the first quarter, we expect prices to remain supported by recovering Chinese demand, ongoing uncertainty around the level of Russian exports and low inventory levels. Turning to natural gas. During the fourth quarter, we saw a sharp decline in both spot and futures prices. The quarter average TTF price fell by 51% as warm start to winter allowed Europe to maintain inventory levels.
In the U.S., Henry Hub declined as storage levels recovered towards seasonal norms. The outlook for the first quarter remains dependent on weather in the Northern Hemisphere and the pace of Chinese demand recovery. Moving to Refining. Consistent with trends in seasonal demand, global margins decreased modestly to average $32.20 per barrel during the quarter. We expect industry refining margins to remain elevated in the first quarter due to sanctioning of Russian crude and product. Moving to our long-term price assumptions. Last week, we presented the BP 2023 Energy outlook. And in line with our annual cycle, we've reviewed our price assumptions used for investment appraisal and accounting. To summarize, the continuing impact of the war in Ukraine and the resulting energy shortages, together with changes in the structure of energy markets post-COVID, means we now expect oil and gas prices and refining margins to remain higher throughout much of this decade.
Further out, we continue to expect prices to fall as the energy transition gathers pace. The charts on this slide show our old new assumptions for Brent Henry Hub and the refining marker margin. In addition, reflecting current market conditions, we've raised our international gas price assumptions through the middle of the decade. In the second half of the decade, we assumed the prices return towards historical levels. These changes have no impact on our cash balance point at $40 Brent; $11, RMM and $3, Henry Hub. Turning to results. In the fourth quarter, we reported a profit of $10.8 billion, allowing for post-tax adjusting items of $7.1 billion and an inventory holding loss of $1.1 billion. Our underlying replacement cost profit was $4.8 billion compared to $8.2 billion in the third quarter.
Turning to business group performance compared to the third quarter. In gas and low carbon energy, the results reflect a below average gas marketing and trading performance compared to an exceptional result in the third quarter lower gas realizations and lower production. In oil, P&L, production and operations, the result reflects lower liquids and gas realizations. And in customers and products, the products result reflects a higher level of turnaround and maintenance activity. The customer's result reflects lower marketing margins and seasonably lower volumes. In the fourth quarter, our underlying effective tax rate was 40%, bringing the rate for the full year to 34%. And finally, our trading business had an exceptional year. And with consistent strong delivery has now contributed an average uplift of 4% to Groupe over the past 3 years.
Moving to cash flow. Operating cash flow was $13.6 billion in the fourth quarter. This included a working capital release of $4.2 billion after adjusting for inventory holding losses, fair value accounting effects and other adjusting items. Capital expenditure was $7.4 billion in the fourth quarter and $16.3 billion for the full year. For the fourth quarter, inorganic expenditure was $3.5 billion, including $3 billion for Arc Energy net of adjustments, and $500 million for the earlier-than-expected completion of the acquisition of EDF Energy Services. During the quarter, BP repurchased 3.2 billion of shares. Reflecting strong cash generation, net debt fell for the 11th consecutive quarter to reach $21.4 billion. And with surplus cash flow, $5.1 billion in the quarter, BP intends to execute a further $2.75 billion buyback prior to announcing first quarter 2023 results.
Turning to our disciplined financial frame. Our resilient dividend remains our first priority. As Bernard outlined for the fourth quarter, we have announced an increase in the dividend to $0.0661 per ordinary share. This is underpinned by strong underlying performance and supported by the confidence we have in delivering further growth in EBITDA and as a result of our updated investment plans. Second, our strong investment-grade credit rating. During 2022, we reduced net debt by a further $9.2 billion. Third, disciplined investment allocation. Capital expenditure for the year was $16.3 billion, slightly higher than expected due to the phasing of our acquisition of EDF Energy Services. And finally, share buybacks where in 2022, we announced $2.75 billion of buybacks from surplus cash flow.
I'll now hand back to Bernard.
Bernard Looney: Thanks, Murray, and thanks for your leadership over the last few years, fantastic. So let me turn then if I may, to the update on our strategy. The world is in a very different place today compared to when we began this journey just 3 years ago. The challenges and volatility we have seen make it clear, maybe clearer than ever that the world wants and needs a better and a more balanced energy system, one that can deliver more secure, more affordable as well as lower carbon energy solutions, the so-called energy trilemma. To deliver that better energy system, action is needed. One, to accelerate the energy transition; and two, ensure an orderly transition from today's predominantly hydrocarbon-based energy system with the emphasis being on orderly to maintain ongoing energy security and affordability.
This means both increased investment in lower carbon solutions that can help society decarbonize faster and not or, something you'll hear me say a lot, and not or, at the same time, continued investment in hydrocarbons to keep energy flowing with energy security and affordability at a premium. At the same time, our track record of delivery over the last 3 years has given us increased confidence in the strategy that we laid out. An integrated energy company is, we believe, uniquely set up to help deliver energy security and energy affordability today as well as to help accelerate the energy transition. And crucially, we believe we can generate growth and attractive returns in doing so. And it is for these reasons that we see the opportunity to lean further into our strategy, and that is what I will now describe.
We remain focused on transforming to an integrated energy company, our 3-pillar strategy, which includes our 5 transition growth engines, is unchanged, as is the fact that the power of integration, underpins and connects it all. So what does leaning in look like? Well, first, we plan to invest up to $8 billion more this decade in our transition growth engines. On average, $1 billion more each year, investing more into higher-return Bioenergy and Convenience and EV Charging where we have established businesses, strong capabilities and a proven track record. Alongside this, we are focusing our hydrogen and renewables and power strategy. Anja Dotzenrath, here in the front row who I introduced earlier, Anja joined us last year and has brought real clarity to that strategy, while at the same time, building our organizational capability and a pipeline of value-accretive growth options, and I will come back to this shortly.
Second, we plan to invest up to $8 billion more this decade, on average, about $1 billion more each year in today's energy system, which depends on oil and gas. Targeting shorter cycle, fast payback oil and gas projects and investing in certain oil and gas assets that we now expect to retain for longer. These are investments that we can deliver quickly over the next few years with minimal new infrastructure and that capture any price upside in the near to medium term. As we do both of these, we expect to materially accelerate growth in EBITDA through 2030. In February last year, we laid out plans to generate group EBITDA between $39 billion and $46 billion in 2030 at $60 real in 2020 terms. With the plan we're announcing today, we now expect to deliver around $3 billion more EBITDA in 2025, rising to a name of $5 billion to $6 billion more in 2030.
We expect our additional investment in transition growth engines to contribute around $1 billion in EBITDA in 2025, and we aim for around $2 billion in 2030. We expect our additional oil and gas investment to contribute around $2 billion additional EBITDA in 2025, and we aim for around $3 billion to $4 billion in 2030. And as Murray previously mentioned, we have raised our price assumptions. Taken together, we now aim to generate group EBITDA of around -- of between $51 billion and $56 billion in 2030. Turning to some more detail on our plans for our transition growth engines. We expect to invest around 50% of our CapEx in 2030 in these 5 engines. This includes both organic and inorganic investments. We will continue to allocate capital to transition opportunities with discipline, applying our balanced investment criteria and investing where we can meet our return hurdle rates.
We expect this investment to accelerate earnings growth from our transition growth engines, increasing EBITDA to $3 billion to $4 billion in 2025, and $10 billion to $12 billion in 2030, up from greater than $10 billion that we announced previously. We continue to expect -- to deliver greater than 15% returns in Bioenergy; greater than 15% returns in Convenience and EV Charging combined. We also expect double-digit returns in hydrogen and 6% to 8% unlevered returns in renewables. Now taking each transition growth engine then in turn. In Bioenergy, we are deepening our investment and now expect to deliver around $2 billion EBITDA in 2025 and aim to deliver more than $4 billion in 2030. We have established global biogas and biofuels businesses that are positioned in an increasingly supportive environment of rapidly growing demand with attractive fiscal incentives.
And our trading capabilities enable us to integrate supply volumes to capture enhanced value. We plan to increase Biogas supply volumes by around 6x by 2030 to around 70,000 barrels per day oil equivalent. We completed the acquisition of Archaea in December. And this is a real game changer for us. Rapidly advancing our access to feedstock and scaling our upstream participation in the Biogas value chain, which is a distinct source of competitive advantage. We're now focused on integrating Archaea into BP and building out the significant development pipeline. We have also identified opportunities to get renewable natural gas projects online faster, and we're looking at ways to improve landfill gas recovery. This is a business that we are very excited about and one that we believe can deliver significant value faster than what we had thought.
In biofuels, we aim to materially grow biofuel production volumes to around 100,000 barrels a day by 2030, focused on sustainable aviation fuel, or SAF, where we aim to be a sector leader. We already produced more than 7,000 barrels per day of biofuels through co-processing, and we aim to triple this by 2030. We also plan to deliver 5 biofuel projects focused on SAF at our Conana, Rotterdam, Castyon, Lingen and Cherry Point facilities. We expect these projects to produce around 50,000 barrels a day by 2030. And the BP Bunge Bioenergia joint venture in Brazil, one of the largest bioethanol producers in Brazil, aims to produce around 30,000 barrels per day by 2030 net to BP. In Convenience and EV Charging, we plan to deliver EBITDA of more than $1.5 billion in 2025, and we aim to deliver more than $4 billion in 2030.
We're confident in delivering our strategy. It remains unchanged, and we have, I would say, even deeper conviction in it. First, in the growing Convenience sector, our combination of local strategic partnerships and global reach enables us to deliver leading offers for our customers. Second, we have a proven track record of delivering growth, and we have continued to grow Convenience's gross margin despite a challenging environment. Third, EV Charging is moving at pace, and we see significant value through our focus on fast charging with customers using our rapid and ultrafast charging points, significantly more than the slower ones. And fourth, major corporations are increasingly demanding decarbonization solutions driving strong momentum in the fleets business.
We're excited about bringing our capabilities and our reach in Convenience, together with EV Charging, enabling us, over time, to provide customer-focused, lower-carbon transport solutions and our confidence is underpinned by strong strategic momentum in 2022. In Convenience, we now have 2,400 strategic Convenience sites with 250 added in 2022. We grew our highly profitable loyalty customer base by more than 5% versus '21. And we're particularly excited about our progress in the United States. For example, has integrated well and delivered a record Convenience gross margin in 2022. In EV Charging, we now have 22,000 charge points and almost all charge points that we roll out now are rapid or ultrafast. We sold 2.5x more electrons year-on-year, supported by increasing power utilization, which is now approaching double digits.
And in fleets, we're building scale, recently announcing our nationwide collaboration plans with Hertz in the U.S. Moving to Hydrogen and Renewables and Power. This is about establishing this decade, the foundations of a material business for the following decades to come. We expect to invest up to $30 billion by 2030, while remaining flexible in our capital allocation as markets evolve and with a focus on returns. Through this, we aim to deliver EBITDA of $2 billion to $3 billion by 2030, ramping up thereafter in the 2030s and beyond. In Hydrogen, our ambition is to build a leading position globally. While the market is at an early stage of development, we see customer demand growing rapidly and regulatory support gaining momentum, as evidenced by the Inflation Reduction Act in the United States.
We plan to use our refineries as demand anchors for hydrogen and to scale these up into regional hubs. These hubs will then provide low carbon energy solutions for customers, particularly in hard-to-abate sectors such as steel. In parallel, as markets evolve, we expect to invest to build global export hubs for hydrogen and hydrogen derivatives. These are in advantaged geographies where we have an established presence. Across all of these focus areas, we will leverage our again, our distinctive trading and shipping capabilities. By 2030, we aim to produce between 0.5 million and 0.7 million tonnes per annum are primarily green hydrogen, while selectively pursuing blue hydrogen opportunities where there is regulatory support and CCS access. Turning to Renewables & Power.
Here, we are focusing our investment in renewables on opportunities where we can create integration value and enhance returns. We aim to participate in 2 ways. First, focused investment to build out a renewables portfolio in service of green hydrogen, green and e-fuels, EV Charging and power trading, including low carbon flexible generation. As part of this, we are building a global position in offshore wind, enabled by our capabilities in large-scale complex offshore projects. Second, we continue to progress a solar development and sell model with Lightsource BP, which is self-funding and capable of delivering renewable power rapidly at scale. Taken together, we remain on track to deliver our 50 gigawatts net developed through FID aim by 2030.
Of this, we aim to have around 10 gigawatts net installed capacity largely operated in offshore wind, solar and onshore wind. We also expect to have assets under construction and for Lightsource BP to contribute materially. And finally, we have brought power trading into the renewables growth engine. This reflects our focus on creating value through integration across our own portfolio as well as the opportunity to help customers decarbonize their power needs as grids and our own supply decarbonizes. And we're in action. Looking back over the past 12 months, we have made significant progress in hydrogen and renewables. We now have a pipeline of hydrogen projects in concept development totaling 1.8 million tonnes per annum net to BP and we would expect to double that by the end of this year.
We're also progressing customer acquisition and have an unrisked customer hopper of around 10 million tonnes per annum. Our renewables pipeline increased by 14 gigawatts in 2022 to 37 gigawatts through offshore wind, Lightsource BP and hydrogen-linked renewables in Australia. As this slide shows, our portfolio is global. It's focused in 4 regions with cost-advantaged renewable resources, policy or government support, where we have an established presence and where we can leverage again our distinctive trading and shipping and integration capabilities. To summarize, we are excited about the portfolio we are building. We have distinctive capabilities to succeed, we believe, and we see huge opportunity to enhance returns by integrating across renewables, hydrogen, e-fuels and e-mobility.
Turning now to our oil, gas and refining portfolio. Let me start with where our oil and gas production is today. It is around 40% lower versus 2019, including the decision by BP's Board to exit Russia. We remain actively engaged in marketing our Rosneft shareholding, and we will update the market as appropriate. But as you have heard me say before and Murray, our oil and gas strategy is about value, not only volume, and our focus remains on maximizing returns and cash flow, reducing emissions and is underpinned by a deep and high-quality resource base that allows us to choose the best investments. Our of resource options enables us to allocate more capital, particularly to short-cycle opportunities to maximize value, including investing more into BPX and more into the Gulf of Mexico.
Having grown production in 2022, we plan to grow underlying production to 2025, adding around 200,000 barrels per day of oil equivalent of high-margin production from 9 major project start-ups by continuing to manage base decline to between 3% and 5%, by increasing BPX production by 30% to 40% and retaining some assets for longer than previously planned. And our resource base has the potential to sustain underlying production broadly flat to 2030 relative to 2022. A great example is in the Gulf of Mexico, where we expect production to increase to around 400,000 barrels a day by the middle of the decade, and average 350,000 barrels per day through the end of the decade. In the second half of the decade, we also have options to progress new hub opportunities, including in offshore Canada, in Brazil, in Mauritania and Senegal in Australia, the Gulf of Mexico and Indonesia.
We also remain focused on high-grading our portfolio and aim to divest around 200,000 barrels a day of oil equivalent of lower-margin assets by 2030, less than previously assumed given the strong progress we have made improving operational reliability and commerciality across our portfolio over the past few years. As a result, our 2030 production aim is now around 2 million barrels a day of oil equivalent after divestments. And to maximize value, we intend to maintain investment discipline with hurdle rates of 15% to 20% at $60 per barrel, maintain a balanced portfolio with a broadly equal mix across oil and gas, drive capital productivity through strong execution capability across our subsurface wells and projects organization and sustained cost efficiency and reliability improvements in our operations.
Our 2022 performance shows our focus on this, delivering our lowest unit production cost since 2006 and our highest plant reliability on record. Turning to refining. Three things. First, through our business improvement plans, we are continuing to drive greater competitiveness and value from our refineries. We are focused on improving process safety and operational emissions and delivering portfolio performance. Second, as I mentioned earlier, our refineries are a foundation for 2 transition growth engines, namely Bioenergy, specifically biofuels and hydrogen. We plan to grow biofuel coprocessing production and deliver 5 projects focused on sustainable aviation fuel. Our existing refining hydrogen demand will be an anchor to build scale through both green and blue hydrogen projects.
And third, we will continue to invest to digitize and modernize the systems and back office of our refining business, as we have in the Upstream over the past decade. This is expected to drive higher reliability, more efficient work and eliminate substantial waste in the system. The combination of an increasingly competitive refining portfolio and the opportunities we see to convert or consolidate refineries to deliver our biofuels and hydrogen strategies means that we plan to retain our current refining footprint and throughput at around current levels. So what does this mean in terms of our pathway to net zero. In short, our destination is unchanged with a triple net zero ambition across operations, production and sales by 2050 or sooner.
Since we laid out our aims in 2020, we have enhanced our net zero 0 ambition. We have increased AM1 to 50% in 2030. We have increased 3 to 15% to 20% in 2030 and net zero 0 by 2050 as well as expanding the scope of AM3 to include physically traded energy products. As we lean further into our strategy, we have updated our goals for AM5, now aligned with our transition growth engines for '25 and 2030. We expect to invest more than 40% or $6 billion to $8 billion of our capital expenditure in transition growth engines in 2025, up from 3% in 2019 and around 50% in 2030, or about $7 billion to $9 billion. We have updated our pathway for AM2, our net zero production aim. We are now targeting 10% to 15% reduction by 2025 and aiming for 20% to 30% reduction by 2030.
We continue to believe that our ambition and aims taken together are consistent with the goals of the Paris Agreement. In summary, our transformation is gaining momentum. Some of the key elements of which are on this slide. We're turning planning into delivery. Turning data on PowerPoints into shovels in the ground, being the good farmer that I am, and that's what performing -- while transforming is all about. It's what people want to see. They want to see delivery, delivery, delivery. We're making strong progress towards delivering our 2025 targets and our 2030 aims and we're leaning in. And with that, importantly, Murray will now take you through our financial framework that underpins this. Murray?
Murray Auchincloss: Great. Thanks, Bernard. Shovels, not PowerPoint. I don't want to live for a while. As you've heard, we see the potential to advance the delivery of our strategy. and create additional value by investing on average up to $2 billion per annum more than previously planned through 2030. Compared to our previous plan, we expect to invest more on resilient hydrocarbons in oil and gas and bioenergy. We also expect to invest more in Convenience and mobility, in Convenience and EV Charging. And we're focusing our capital expenditure in hydrogen and renewables power, planning to reallocate around $10 billion across the decade towards Bioenergy and Convenience and EV Charging. In aggregate, we now expect annual capital investment, including inorganics, to be in the range of $14 billion to $18 billion through 2030.
For 2023, reflecting our expectation of a supportive price environment, we plan to invest between $16 billion and $18 billion. And we retain significant flexibility in our investment plans. In a lower price environment, we anticipate managing shorter cycle investment, particularly in hydrocarbons to maintain a resilient cash balance point of around $40 per barrel Brent; $11 RMM; and $3 Henry Hub. To turning to EBITDA, these changes to our capital investment plans underpin an uplift of $5 billion to $6 billion to our 2030 EBITDA aim. As a result, and together with our revised price assumptions, our 2025 EBITDA target increases to $46 billion to $49 billion and our 2030 EBITDA aimed to $51 million to $56 billion. And as Bernard outlined, within this, we now expect our transition growth engines to contribute $10 billion to $12 billion of EBITDA in 2030.
Our $46 billion to $49 billion 2025 EBITDA target is underpinned by the strong and highly visible operational momentum we see ahead of us. In our transition growth engines by 2025, we expect an 80% increase in our biofuel volumes, around a 30,000 barrel oil equivalent per day increase in biogas supply, a 25% increase in the number of strategic Convenience sites and around a doubling of EV charge points. In oil and gas, by 2025, we expect an incremental 200,000 barrels per day of high-margin production, an increase of 30% to 40% in production from BPX Energy and more than a 30% increase in LNG supply to around 25 million tonnes per annum from Coral, Venture, Mauritania, Senegal, Tango and the return of Freeport. And this strong operational momentum is supported by our continuing focus on cost efficiency and digital.
Having completed the largest reorganization in our history, we've delivered on our target of $3 billion to $4 billion of pretax cash cost savings by 2023 relative to 2019 around a year ahead of schedule. Looking ahead, we're working hard to extend the progress we've made in deploying digital and standardization in the upstream to the broader group. This will take time, but we continue to see a substantial opportunity to drive savings, which absorb inflation and provide the space for us to profitably expand our transition growth engines. As we deliver our business plan, we remain focused on the disciplined delivery of our financial frame. Our first priority remains a resilient dividend accommodated within a balance point of $40 per barrel, Brent; $11, RMM; and $3, Henry Hub now defined on a point-forward basis.
We see capacity for an annual increase in the dividend per ordinary share of around 4% per annum at $60 per barrel, subject to the Board's discretion. Second, maintaining a strong investment-grade credit rating. For 2023, we intend to continue to allocate 40% of surplus cash flow to further strengthen the balance sheet and now target further progress within an A grade credit rating. Third and fourth, we plan to invest with discipline in our transition growth engines and in our oil, gas and refining businesses. And finally, share buybacks. We are committed to allocating 60% of 2023 surplus cash flow to buybacks and expect a buyback of $4 billion per annum at around $60 per barrel at the lower end of our capital range and subject to maintaining a strong investment-grade credit rating.
Taken together, we believe this business plan and financial frame delivers for shareholders today. It offers first double-digit per share growth. We now expect to deliver an EBITDA per share CAGR of over 12% between 2H '19, 1H '20 and 2025 at $70 per barrel 2021 real. Second, competitive returns. We have increased our ROCE target and now expect to achieve over 18%, both in 2025 and 2030 and at $70 per barrel 2021 real; third, debt reduction through our intention to allocate a proportion of surplus cash flow to strengthening our balance sheet; and fourth, compelling shareholder distributions through our resilient and growing dividend and with leverage to higher prices through our share buyback commitment. Let me now hand back to Bernard to conclude today's presentation.
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